Brain Food for Pioneering Spirits: What actually separates a startup from an ordinary new company, and why do established companies increasingly spin up their own startups on purpose? In Room #865 of the Deep Talk Club, under our overarching theme “Pioneering Spirit with brAIn,” the group digs into scalability, the five-year survival window, startups as deliberate test balloons for legacy companies, and why a healthy error culture matters more than a business plan. Listen in on the examples that came up and the perspectives that emerged in dialogue…
Note: This session was recorded live in German as part of the Deep Talk Club, so the video above is German-language audio only. What follows is an English translation of the conversation, lightly edited for readability — the back-and-forth between the moderator and participants is preserved, but the original timestamps and speaker names have been left out.
A wonderful good morning. Today we’re talking about startups and their successes, or failures, and want to look at startups that are changing our world — which success stories and failures, or factors for success and failure, do we know of? And with that, I’m really, really delighted to officially welcome Jürgen at my side again. And you already brought a first question into the room before we had technical difficulties, and I’d like to ask you, Jürgen, to repeat that again.
Yes, gladly, I’ll keep it short. The actual question, the core of the question, is what makes the difference between a startup and a newly founded company. As I said, I tried to define this distinction a bit more clearly for myself using how it’s tagged online, and I’ll give an example — if you enter the search term, it says, and I quote, “a startup company is a newly founded company with a particular dynamic based on perceived demand for a product or service.” End quote. What is particular dynamic — question mark on my face, in any case — and perceived demand? I mean, sorry, if I apply this to myself, I wouldn’t found a new company if I didn’t know there was demand for a potential product, or my product. There are other definitions that are, in my view, even vaguer, but that should maybe be enough to get the discussion going. Thank you.
Yes, wonderful, thank you, thank you so much. As far as I know, this term “startup” popped up, to some extent, in the context of companies with, say, newer technologies and so on, particularly from the Anglo-American world, and typically, startups were initially, first and foremost, innovative companies referred to as such — meaning it was about innovative, scalable products, services, and so on. However, nowadays it’s often the case that terms get adopted and then modified, and it’s usually used synonymously, so that basically any company with an economic background gets called a startup, and typically people speak of a newly founded company, or a startup, if the company hasn’t existed for more than the first five years or so, because these first five years in particular are, statistically speaking too, the time in which it’s actually decided whether most newly founded companies, or startups, survive or get swept off the market again, so to speak. Does that help, dear Jürgen?
That always helps, dear Yasemin, thank you for the explanation. It always helps when you’re clear and in agreement about what’s meant by something. And for myself, I’ll take away that the qualifying criterion for classification is the duration, the length of time the company has existed. You mentioned, or defined, what I’ll call a ramp-up phase of up to five years — did I understand that correctly?
Yes, exactly. Typically, statistically speaking, it’s these first five years that are critical, and that’s why people typically speak of startups particularly during these first five years. There will certainly be different definitions here too — I think we can use this, also drawing on, for example, if you look at bureaucratic documents or something, tax office contexts and so on, with newly founded companies it’s always checked whether the company has existed for less or more than five years, so to speak. So these are usually the framework criteria set from outside, for various inquiries, applications you submit, or whatever. And it’s certainly not a universally valid definition, but here too, as with many different terms we use, there’s often no consensus or agreement, but maybe at least we can use this as a kind of common understanding. So that means, if I’ve opened up today’s room with “we’re talking about startups,” I primarily mean companies looking at the first five years — these can also be well-established companies by now, where we’ve at least maybe caught a glimpse of that early period, and I’d define that timeframe now as roughly the first five years. Do you have examples? Does anything come to mind for you, Jürgen, that you’d like to bring in as an example?
No, I have to honestly say, as I said, I went into this hour with you today rather naively on this topic, just to listen in and understand, first and foremost, of course — we’ve clarified that now — what a startup actually is. And there’s just one thing you said, which I also read online, a term I got stuck on again — you talked about, on the one hand, innovative companies, or newly founded companies, or startups, innovative business idea is one thing, and the other is scalable products. And that’s of course also a position where I’d say, well, first, what’s meant by scalable? You’d have to agree on that too. But I’d also say, that doesn’t disqualify me from being a garden-variety new company either, because I have to assume scalability, I’d claim, as an entrepreneur — otherwise I wouldn’t actually get out of the seed funding and possibly the negative cash flow that’s normal in the founding phase. I don’t know how you see that.
It’s important there too, and I’d mentioned this, that originally this innovation and scalability aspect was one factor in how these terms emerged — today, and that’s maybe why we can set that aside, we don’t need examples of companies now where we’d say, that’s innovative or scalable, but nowadays it’s really used as a synonym for newly founded companies in a lot of places. Still, I’d gladly go into this term of scaling again. Typically, scaling means that the product or service can actually be exponentially multiplied. To illustrate the difference with an example — if I go self-employed as an individual with a service, scaling is only possible up to a certain degree, as long as I work alone, because my time, for example, is limited — meaning my resource of time can’t be scaled up infinitely at that point. If, however, I have a product I offer, and that can also be a service, with certain automation behind it, so that doesn’t mean it’s not a service, but it’s about the way it gets brought to market or to the customer — if I work with digitalization and automation behind it, for example, then it can often be scaled up almost infinitely, meaning I can bring the product or service to market not just once but a hundred thousand times. And in this context, people typically talk about scalability — meaning, in principle, making distribution possible independent of my time resource, so to speak. But if the service I offer is only geared toward my own competencies and my own time, then there’s a limitation here, and at the latest at that point I’d need to bring a second employee on board, to whom I transfer, convey, teach this knowledge — and here too, again, that’s a limited resource, it can’t simply be exponentially multiplied. And that’s usually where the difference in scaling is seen. I hope that’s understandable, what I mean. Jürgen, maybe you’d like to add to that briefly.
Yes, that definitely fits with my understanding of scalability. And for me, scaling is basically climbing the stairs — meaning I see the possibility in my business plan, I definitely see the possibility to grow, to expand, though there are always two sides to consider. Ceteris paribus, regarding chances of success or business success, you can always expand justified from two sides — one, through reducing effort, or costs, and on the other hand, through increasing revenue. But I think that’s going a bit too far from the original topic now. But I’ll say again, I can’t offer a concrete startup example that’s top of mind for me — sorry.
Yes, what I find really exciting about startups — we can stay relatively general and also a bit abstract, unless someone joins and brings in examples too. One of the most common things that strikes me in the context of discussions where traditional or startup companies point at each other — we classically have the assumption, or observation, experience, that in traditional, well-established companies that have existed forever, that you somehow know, the bigger the company, the more regulations there are, the lower the speed at which, say, decisions get made, often lots of hierarchies and so on. Whereas with startups, because a lot of things haven’t been established yet, so to speak, they’re in a state of newly forming, and through this phenomenon of new formation, essentially a new constitution of a team — let’s assume someone isn’t working alone anymore but a small team already exists — no culture has developed here yet, but that’s, in inverted commas, all still allowed to find itself. And especially in this early period, where a lot can still find itself, there are often no strong hierarchies, a lot happens at eye level, maybe decisions get made collectively, and new ideas keep getting picked up quickly, moved into implementation, and so on. And that seems to be a really big difference — though one aspect I find really important here is that this has to do with the framework, not because startups per se pride themselves on acting quickly, on having no hierarchies, but the bigger a startup gets, and you can very often observe this — if we take really big companies, whether that’s an Apple or whatever, here too, if you compare, what do you learn about the early days, especially with these classic US companies, somehow the whole thing started in a garage and grew, and at some point, once it’s reached a certain size, certain hierarchies start appearing, certain regulations start appearing. A certain standardization, unification, and so on becomes necessary — which, in a startup per se, because nothing has settled yet, in inverted commas, the guardrails often aren’t there yet, a lot is still in a kind of finding phase. You can compare this to a traditional company too, if you were to found a new department and have new employees, a new team formed. Here too, certain processes, the way people work together, the roles, all need to develop, and here too, at first, a kind of, well, an invention phase takes place. And I find that a really interesting phenomenon, but it’s often something that just isn’t seen — instead it’s treated, in inverted commas, or perceived, as if startups per se are simply always faster in what they do. And what often gets overlooked, in my view, is that especially with newly founded companies, clarity can be lacking in a lot of places too — meaning, whenever you have a new idea, you start working on a new idea again, and then the old idea is already outdated again, and basically you constantly have 5,000 more new ideas you’re working on, and none of them might have been thought through to the end, or even implemented. So that’s also a phenomenon you can observe very often with startups. I’m curious what your impressions are on that, Jürgen — or maybe there’s something you know from the media or similar, whether you have the feeling, oh, that sounds familiar to me somehow.
Indeed, thank you. In the first moment, in the first part of your remarks, I draw a sharp conclusion — if I’m in the position of chairman of the board of a well-established company, and I notice that everything at my shop is pretty ossified, and the processes are stuck, the thinking is stuck, and so on, then I found a startup in a certain segment associated with being innovative and possibly equipped with new technologies. Basically, for me, or as I’ve concluded from what you said, that’s a deliberate outsourcing from an existing, well-established or older company, in order to break free from certain ossified structures — exclamation mark. And I actually thought of a position I read about recently, that I picked up — I’m not sure though whether it’s actually treated as a startup, but Porsche decided two, two and a half, three years ago to enter the e-bike market, in collaboration with a well-established but very innovative bike manufacturer, and brings into this new collaboration, startup question mark, in particular the technology, the already existing technology in the battery sector from car technology. What I mean is, the biggest problem with bikes, regarding weight, weight reduction, is on one hand the motor and on the other the battery. And that would lead me to conclude that this is also a huge benefit, not just for someone who suddenly shows up with a great new business idea, but for someone who, as I said, comes from an already existing product-related, technological environment, in order to break up ossification, old, entrenched processes — I’m repeating myself now — to give the whole thing a corresponding drive, and for what purpose, to seize the opportunity in the market and bring in already existing know-how. That would be something for me where I’d say, yes, that makes sense.
Yes, wonderful, thank you, thank you so much. Really exciting, and that actually happens in a lot of places too, especially when it comes to, say, opening up new markets, bringing together old and new knowledge in a certain way from different industries and fields, which traditional companies increasingly do too. If you research this a bit, you’ll find that well-established, traditional companies actually do go into a kind of outsourcing, new founding, in inverted commas, like the Porsche example you brought in, in order to set something new in motion parallel to this well-established, traditional company. That’s really exciting, especially against the backdrop of the definition, so to speak, of what we understand a startup to be — we tried to narrow that down, and the question arises again here, is this actually a classic startup or not, because of course the experience and so on of the company flows in here on one side, and usually it’s not a completely new founding that’s entirely detached from the traditional company, but depending on how the corporate structures are chosen or similar, it also, under an umbrella structure, so to speak, legally speaking, from the constitution of the company, does represent a new leg, in inverted commas. So it would also be interesting to consider this — does that even fall under a startup or not. But per se, yes, it’s a possibility. I’d already brought up the example of how I could also found a new department — in contrast to the department I could found, I could say, I’ll open a new area within the company and put together a new team here. But then I have the following disadvantage, in inverted commas — certainly also brings advantages, but I have this disadvantage in any case, namely that the team that forms here, even if these are completely new employees I bring in from outside, still comes into a set corporate culture, so to speak — they might not yet know the customs and so on, but against the backdrop that an existing culture is present here, in inverted commas, they’ll relatively quickly make certain adjustments to their behavior, to the way they work, and so on, even if their own subculture develops too, it’ll dock onto the existing system. Whereas if I have an outsourced, a spun-off new founding, whether that’s drawing on another area or whether it’s a completely separate area — regardless of that, I initially have no extremely fixed guardrails, and something independent forms here, initially detached from this other traditional company, which has already developed its own culture and dynamic over the years. So that’s something really exciting to look at. And at the same time, once this new founding has been carried out, it’s often the case that after the first few years, once certain developments and so on have taken place, a kind of completion takes place too, so that it can then be integrated back into the existing areas — meaning a kind of reunification happens after a certain time, so that it doesn’t stand detached and outside the whole time, but a reunification takes place here too, after this first, I’ll call it, conception phase, finding phase and so on, certain things have taken place, and it was set up and built relatively detached, in inverted commas, from the traditional company at first. That can of course also have a positive effect, bringing fresh wind into this well-established tradition, and thereby also contributing, for example, to certain patterns of behavior being recognized or broken through, adapted, or similar. Jürgen, what do you say about that?
Yes, I’ll gladly pick that up. Your input, dear Yasemin, I’m back in the position of a chairman, and I’d say a startup like this also has the character of a test balloon, so to speak. Namely, if I’ve recognized that an innovative product, an idea, can’t be moved forward with the necessary dynamic within my ossified structures and organization, then I found a startup and launch this startup with freedoms, in inverted commas, freedoms, or with a playground with regard to new courses of action regarding new models of employee leadership and so on, and test whether it then, in terms of value and in terms of the assumed efficiency, actually crystallizes out that way, on a small scale, in a fractal organization, so to speak, in order to then transfer it to the overall company. That was a point where I’d say, that could actually be the benefit — that’s what I’m doing this for. I think, yes, that would be worth considering.
Yes, absolutely. And what’s interesting in this context is, it’s not just that if it proves itself, I can then integrate it, for example, but if I notice it’s not working, or it just doesn’t fit for whatever reason, it’s not the way we imagined it, then of course there’s relatively easily the possibility to also shed it again. That can be an exit strategy, it can be that it comes to a sale, or that it’s completely wound down, so to speak. And because I set this up from the beginning detached or separate from the parent company, I also have, figures, data, facts-wise, in inverted commas, no negative impact — that this then, especially with stakeholders and shareholders and so on, that the figures negatively affect the traditional company somehow — because I already set the corresponding framework conditions at the start in such a way that this is a bit detached from each other. Then you have certain budgets allocated for that, and so on, then you have a certain framework within which the whole thing is initiated, and within this framework, it operates. That means the risk is also manageable, in inverted commas, and I can then, at the appropriate time, depending on the results that emerge from this, also decide how to proceed and deal with it in the future — also from the board’s perspective now. Jürgen, that’s actually a cool thing, isn’t it?
Yes, if the board has the corresponding stance regarding dealing with error culture and dealing with mistakes or failures. And something’s popping up for me now that I hadn’t classified yet — I don’t know the name of the American multibillionaire, how can it be, Branson or Benson or something, who definitely withdrew from the space topic recently. And where Mr. Musk apparently still sets the pace, even relative to NASA — but what I found remarkable about this note I read was how positively, offensively he dealt with this innovation, which turned out not to be cost-covering, no longer purposeful. And that’s exactly the point you raised — always two sides. I create a test field via startups, to test whether I can break open my overarching, meta-level structures, and if it then goes belly-up, well, that’s actually great — then I know I’m actually correctly positioned, it must be hanging on something else somewhere. But the path I tried, that’s obviously not the solution.
Yes, wonderful, nice example, and you mean Richard Branson. Yes, Branson was correct there. And above all, as you just said, I have both areas here — meaning on the one hand I can shed it, in inverted commas, if it’s not working well. That means I have certain figures, data, facts predefined for myself, that I can orient myself by, and if the expectations aren’t met, I can make a decision accordingly — and this decision goes in both directions. And at the same time, I can also pick up this new venture, which is set up and run separately, as a kind of lighthouse project within the scope of the traditional company, and show it, show the developments too. And if I have the feeling that this lighthouse project, if it turns out that the lighthouse project works well too, then it’s not just a lighthouse project anymore, but out of the lighthouse project something emerges that gets firmly cast into certain structures and further expanded, deepened, and so on. That means, after a certain time, from this lighthouse project, initially started as a project idea, you then also have a new area, and you can implement the whole thing into the old structures, and so on. And so we have both directions here, and the nice thing is, as you just mentioned, this aspect of error culture too — especially in a newly set framework, where anyway a relatively large finding phase and so on is still happening, error potential is often handled quite differently, because since it’s this kind of balloon, so to speak — I’ll blow it up now and see how far I can blow it up without it bursting, in inverted commas — I’ve actually chosen a new form here, in which, within only certain guardrails initially set as an idea, you just look a bit at what can develop from it, or what works, what doesn’t work, and often, smaller or bigger mistakes at first get handled differently than in a classic traditional company, where a certain mentality or way of thinking regarding dealing with mistakes and so on already exists, which usually isn’t written down but where sanctions or similar usually happen informally too. That means a culture that’s proven itself, that’s asserted itself over many years, so that automatically, without there being any regulations in some cases, consequences can still follow — whether that’s exclusion, whether that’s how employees deal with each other and so on, whether we’re talking about blaming, whether we’re talking about whatever gets brought up here, scapegoating, and maybe even sanctions in the harshest case. All of that is something that’s handled differently in the context of a new founding, and with a new founding, there’s also no expectation that everything works immediately, but the time factor is usually different too. So while with traditional, well-established companies we run a project and often have a relatively short timeframe — meaning most projects, many projects are designed for one to three years, for example — with a new founding that docks onto the well-established company, we often have, basically from the start, a timeframe similar to these startup ideas, often five years at that point. So that’s relatively exciting too, because how you handle these time dimensions, mistakes, and so on, is also shaped differently. And exactly — let me just check if we have something in the chat in parallel — Ingo shared something, Virgin Galactic Spaceship Two is flying again, okay, and maybe you could, Ingo, write a bit more about that, then I can pick that up too, so we can classify it correctly. And Jürgen, do you have any further thoughts you’d like to add here, or should we slowly move into the closing round for today?
Yes, I’ll take this now for myself, and it might also serve as a closing statement, dear Yasemin — I’m taking a lot away from this conversation, unfortunately just a conversation with you, that’s not meant to be dismissive, God forbid, but there was a lot in it for me that I can now reassess. Right at the end, a thought occurred to me — you mentioned it in the definition too, the tagging, on one hand scalability, and the other term was innovation. What’s left as a question mark for me now, without us needing to go further into it, is that the mere way a project, or a new founding, or a startup, whatever, is led — the mere leadership, yesterday’s topic, under innovative aspects, and as you put it so nicely, lighthouse character, pointing the spotlight into the fog and seeing if it works — that alone might justify calling something a startup. That’s something I’d take away for myself now.
Yes, absolutely, thank you, thank you so much. And that’s really what this is about — with some terms, we’re maybe just not that deep into them yet, and then it’s also sensible to approach them and see what actually happens there and in which contexts. And that’s why I thought it was great that you opened with these questions too, what actually is a startup, what would you call one. And you can see here too, there aren’t necessarily always 100 percent clear answers, but when we take first approaches, when we pick up these terms again and look at them more closely, also in the sense of sorting our own thoughts, so to speak, engaging with them and then slowly working our way along, some really nice examples come together again, in terms of thoughts and perspectives, and it’s really exciting to look at startups not just in relation to a completely newly founded company, but that was today’s focus too, alongside the traditional company, this additional leg, so to speak, that starts as a kind of test phase, where various possibilities exist, and you connected it so nicely with yesterday’s topic, the aspect of leadership, where leadership is certainly shaped quite differently too, against the backdrop of this separation from the traditional company, and the perspectives are different too, the type of leadership is certainly different too, and a lot can emerge here in this finding phase. And then you can go into reflection again, so to speak, look at the whole thing, not just from the figures-data-facts perspective, but also from the perspective, against the backdrop of an independent culture that develops here in this new founding, to see, what worked well, in what context did it work well, and how can this or that actually be transferred into the well-established company, so to speak, taking over parts of it — and on the other hand, the things where we feel it didn’t quite work, being able to mentally shed those again too. And I think it’s really important that there’s this kind of new learning environment, in which new experiences get made and gathered, and against the backdrop of the results, so to speak, reflection and results, decisions get made again, and based on that, you consider again, does a merger happen, for example, does it work quite well as it is so you expand it further without merging, but maybe transfer aspects from it into the well-established company, and so on. And a lot, a lot of interesting possibilities can actually emerge through this kind of setup, which you can use very positively for yourself in that sense. So a really exciting thing, and also a circumstance that more and more companies, well-established companies, are actually discovering for themselves, and setting up structures in this way too, to, and there’s no other way to put it, these are learning experiences, to make learning experiences. And there we’re back at the term learning, I think, so really, really exciting too. And yes, then you can look at what learning experiences you make and continue accordingly based on that.
Yes, wonderful, thank you, thank you so much for these thoughts, impulses you brought in, Jürgen, and that we managed, despite the technical challenges we had this morning at the start, to get it all recorded, that it all worked out — I think that’s wonderful. And tomorrow it continues with biotechnology and the future of medicine — we want to look at what biotechnology actually is, what falls under it, and what a possible future of medicine looks like against the backdrop of the developments we can already observe here, so which direction the whole thing is heading. That will certainly be very, very exciting too. You’re all very warmly invited to join again tomorrow at 8. And with that I wish you a wonderful day for now — thank you again so, so much for joining, and for the impulses that came in, especially to you, Jürgen, and also the morning greetings and so on via chat, I always think it’s great that things happen via chat too, and then I’m looking forward to a lovely continuation together tomorrow morning at 8 at Deep Talk with you all. Until then, I wish you well. Ciao.
